The irresponsibility of the rich

Inequality has widened: the child poverty figures are up by 100,000 for the second year running and pensioner poverty is once again on the rise. Faced with these shocking figures, Ruth Lister argues for a radical shift in the terms of the debate

September 18, 2008
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11 min read

The most recent statistics show that the government has to more than redouble its efforts if it is to have any chance of meeting its target of halving child poverty by 2010. While it was right to prioritise children and pensioners, its lack of concern about poverty among childless adults of working age has come back to haunt it in the 10p tax band fiasco. The poverty rate for working-age childless adults is now close to a modern record, according to the Institute for Fiscal Studies (Poverty and Inequality in the UK: 2008 by Mike Brewer, Alastair Muriel, David Phillips and Luke Sibieta).

More generally, the government’s unwillingness to acknowledge underlying structural inequalities, such as of class, gender and ethnicity, or how its own economic policy has fuelled inequality, particularly at the very top of the income distribution, means that economic inequality is slightly wider than when Labour came to power more than a decade ago.

In 2006/07, the top fifth of earners enjoyed 44 per cent of the country’s post-tax income; while the bottom fifth made do with just 6 per cent (1 per cent less than in 1997/98). While it is important to contrast this with the massive widening of the wealth gap under the Tories, and to acknowledge that without Labour’s anti-poverty policies the gap would be wider still, we have to say loud and clear that this is just not good enough.

Beyond meritocracy

Equality stands at the heart of the progressive agenda. As a material reality inequality distorts our lives and our social and political relationships with each other. The ideal of equality offers us hope of a better society and way of being. It is rare to hear New Labour politicians talking in such terms. Instead, the talk is of meritocratic opportunity, aspiration and social mobility.

Not everyone can or wants to climb the meritocratic ladder. Why, for instance, should someone who sees their vocation as caring for others – be it children or older people – have to make do with a pitiful fraction of the rewards enjoyed by those in the City or on a football pitch?

The very fabric and construction of the ladder is unfair in terms of the skills and experience it values and, as the reference to care work suggests, the bias in its construction is heavily weighted against women. Moreover, the ability to live a full and flourishing life should not be the preserve of the privileged, but should exist for everyone regardless of their place on the ladder.

Changing the terms of the debate

One reason for New Labour’s timidity is that even those who subscribe to a more egalitarian agenda fear that it will alienate the electorate. It is one of the paradoxes of public attitudes that surveys consistently show a large majority unhappy about the disproportionate rewards at the top and about the gap between rich and poor. Yet a much smaller and diminishing group supports redistributive policies to narrow the gap.

This may be indicative of the limits of a policy of redistribution by stealth without a clear articulation of egalitarian values in mainstream political debate. If even a Labour government is not prepared to make the case for redistribution, then perhaps the public comes to believe the case is a weak one and that government does not have a legitimate role to play in narrowing the gap.

If that is what has happened, then one of our main challenges is how to change the terms of the public debate and make the case for tackling inequality. What follows does not claim to be the answer but simply offers some ideas.

The first step is to convince the public and the government that urgent action is essential for the health of our society; the second is to make a persuasive case for government action. This means painting a tangible picture of how inequality harms us and of what a more equal society might look like.

The statistics about inequality and poverty do not get us very far. They are important in measuring change and holding governments to account. But they don’t engage people; indeed they can have the opposite effect, as often people simply don’t believe them.

Can we therefore find ways of bringing home the reality of inequality’s corrosive impact on everyday lives? On people’s health – for instance, Michael Marmot’s example of the 11-year life expectancy gap between Hampstead and St Pancras, the same as between the UK and Guatemala? (‘Reducing inequalities in heath: a policy choice’ by Michael Marmot in Live Longer Under Labour!, Fabian Review vol 120, no 1, 2008). On access to housing? On children’s educational experiences and life chances? On the environment in which people live, and the quality of their social relations?

As the work of Marmot and Richard Wilkinson, professor of social epidemiology at the University of Nottingham and author of The Impact of Inequality: how to make sick societies healthier (Routledge, 2005), demonstrates, it is not just those living in poverty who suffer but those on low to middling incomes too; indeed the whole fabric of society is damaged.

The need for such examples points to a missing space in political debate between the details of specific policies and the generality of abstract values. This space needs to be filled in with a more concrete vision of what a more equal society might look like. And we have to show that we believe that such a society is possible.

The irresponsible rich

One of the values upon which New Labour places great emphasis is responsibility. Responsibility is an important element of citizenship but I am tired of constantly hearing about the responsibilities of ‘the poor’ and the need to change their behaviour and nothing about the responsibilities of the privileged. It is time to expose their irresponsible behaviour, which is considerably more damaging to society. Three examples of this irresponsible behaviour relate to the economy, the exchequer and the environment.

Most visible in recent months has been the irresponsible behaviour of those in the City and the boardroom driving high-risk, bonus-crazy, irresponsible capitalism, leading to the credit crunch, which hurts other people much more than themselves.

During the boom the rich distorted the housing market, particularly in London, contributing to unprecedented levels of housing inequality, and now the credit crunch is squeezing those at the lower end of the housing market. The TUC has recently drawn attention to the irresponsibility of tax evasion and avoidance by individuals and companies, who cheat society of resources and act as if it is their right not to pay their dues.

From a global perspective, Christian Aid has argued that the lives of almost 1,000 children could be saved every day if only the super-rich and the world’s largest companies paid their fair shares in taxes. And that figure relates only to illegal, trade-related tax evasion; it would be far higher if it included other forms of tax evasion and legal methods of tax avoidance. The report (Death and Taxes: the true toll of tax-dodging, May 2008) points out how the pursuit of profit trumps social responsibility.

Finally, we should name and shame the ecological irresponsibility involved in the ways in which many of the rich spend their money. Earlier this year I watched in fascinated horror Robert Peston’s BBC programme on the super-rich. The only woman to whom he spoke was part of the industry that has grown up to help the super-rich spend their money; as more than 90 per cent of the richest 0.1 per cent is male this gender bias is not surprising. We’re not just talking gas-guzzling cars here but massive ‘super’ yachts, private jets, submarines and a Valentine’s Day dinner on an Arctic iceberg.

It is those in poverty both domestically and globally who pay a higher price for climate change. Globally, a series of reports has underlined how the costs of global warming are borne disproportionately by the poorest countries, with predictions of growing numbers of environmental refugees as a result. In the UK, to take just one example from a new book on social justice and public policy, half of all carcinogenic emissions occur in the 20 per cent most deprived wards, in contrast to 9 per cent in the 20 per cent least deprived (‘Understanding environmental justice’ by Maria Adebowale in Social Justice and Public Policy eds Gary Craig et al, Policy Press 2008).

We need, therefore, to do more to link the inequality and environmental agendas. The notion of environmental justice has been developed but it is not yet part of mainstream political debate and the extent to which the rich are fuelling environmental injustice is not being exposed.

Policy agenda

The second step in changing the nature of the debate on inequality involves rebuilding public confidence in the state (with all its flaws) as an instrument of fairness, with reference to both distribution and redistribution. There needs to be another look at the remuneration structures that fuel inequality. Giving shareholders the power to vote on directors’ pay has not worked.

It is depressing to contrast the German Christian Democrat chancellor Angela Merkel’s call for a crackdown on fat cat abuses with John Hutton’s celebration of super-high salaries as an indicator of success. Indeed, the British government intends to lead the opposition when it comes to EU finance ministers’ plans to attack the ‘social scourge’ of excessive executive pay and bonuses. The political mood among EU leaders and the evidence of public disquiet about the distribution of original incomes and about excessive high salaries and bonuses creates potential space for a debate about inequality.

Questions such as what is a fair differential between top and bottom earnings and about the rewards attached to different kinds of work should be part of the debate. A responsibility agenda opens up the space to talk about taxation, not as a burden but as an exercise of citizenship responsibility. There is still a strong case for a higher rate of tax for those earning over £100,000. This could raise nearly £8 billion – more than twice the minimum needed to meet the next child poverty target, even allowing for behavioural changes (primarily tax avoidance) in response to any tax increase. Such changes could be minimised if a higher rate were combined with tougher action on tax abuses, as called for by the TUC.

In addition, other reforms could make the tax and national insurance systems more progressive and wealth inequalities could be reduced through reform of inheritance tax, as proposed recently by the Fabian Society.

At the other end of the income distribution, a focus on the responsibilities of the rich would fit well with the government’s call in its latest child poverty strategy document for a new ‘contract out of poverty’ in which ‘all parts of society will do their bit’. Paying more tax is one way the rich can ‘do their bit’. This would help to pay for the improvements in benefits and tax credits, which have to be one element in achieving the child poverty targets.

Current benefit up-rating policy, which links most benefits to prices but not average household incomes, is criticised for fuelling economic inequality in a recent Joseph Rowntree Foundation-funded report (Keeping up or falling behind? The impact of benefit and tax uprating on incomes and poverty by Holly Sutherland, Ruth Hancock, John Hills and Francesca Zantomio, Institute for Social and Economic Research, 2008).

While the government is to be congratulated for improving financial support for children in real terms, it has ignored their parents’ benefits. Moreover, the differential impact of inflation on those on low incomes, as the prices of necessities such as food and fuel soar, eats into low wages and benefits and means that inflation-proofing is not providing adequate protection.

As the government places more and more emphasis on the responsibilities of benefit recipients, and as benefits become increasingly conditional, it should articulate a clear goal of a right to benefit sufficient to enable people to live decently and with dignity in keeping with human rights principles.

At the Compass conference on equality in June, ministers sympathetic to the equality agenda acknowledged its importance but lacked any sense of urgency with regard to the action needed. If Labour only has two more years in power, it should use the time to turn the tide of inequality decisively; otherwise it would be a tragedy of missed opportunity if, after three full terms, it left Britain more unequal than when it came to power.

Ruth Lister is professor of social policy at Loughborough University. This article is based on her keynote presentation at the Compass Robin Cook Memorial Conference on equality in June 2008